Phoenix is $242 million in the red, but that number does not include the $300 million it owes on the $600 million new and expanded Phoenix Convention Center. Arizona Republic: “City Manager David Cavazos proposed shutting down senior centers, libraries and sports complexes, and laying off hundreds of police officers and firefighters for the first time in decades. . . . Cavazos’ proposal would eliminate 1,379 of the city’s 16,000 positions . . . . The Police Department would lose about 353 sworn positions, from patrol officers to assistant chiefs. The Fire Department would cut 144 sworn jobs.”
In a shocking story in today’s Arizona Republic we learn that Phoenix’ new $600 million convention center is a very expensive money pit. The Republic story says:
The center has been forced to cut its own operating budget, its revenue is falling and it is soon expected to struggle to make payments on its construction debt. . . . the center is struggling, largely because of the structure of its funding system. It relies mostly on a certain portion of city sales taxes, which includes a part of the hotel bed tax but comes largely from purchases involved in construction. Those tax revenues plummeted amid the economic slump. . . . City taxes provide 80 percent of the convention center’s revenue. Receipts from the taxes that fund the center are falling and are expected to generate $34.8 million this fiscal year, 30 percent less than previous projections. . . . The center is having trouble paying the $14.9 million annual payment on its $300 million city debt. The city and the state split the original $600 million cost. . . . Just 20 percent of the convention center’s operations budget is funded by income from conventions, such as rental fees.
Yikes! The center only generates 20% of the money needed to operate it and that number does not include the annual debt service on the $300 million! The Republic article did not say how much money is needed to operate the convention center each year. What happens if the city cannot make the payments on the construction debt? Will the near bankrupt State of Arizona pick up the tab? This is what happens when government spends money it does not have. Maybe the City of Phoenix should follow the lead of the State of Arizona and sell some of its assets to get the money to pay its deficits and keep the new convention center. I am sure Phoenix could sell the light rail system that has exceeded rider projections for a lot more than the $1.4 billion cost of the system. Surely the value of the Phoenix light rail has increased since its completion.